What is Cash Out Refinance?
Cash-out refinance allows you to convert your property equity into cash by taking a new, larger mortgage than your current outstanding loan. The difference between your new loan amount and your existing loan is given to you as cash.
How It Works:
Property Valuation
Bank determines your property's current market value
Calculate Available Equity
Maximum loan (up to 90% LTV) minus your outstanding balance
New Loan Disbursement
Bank settles your old loan and gives you the cash difference
Example: Your property is worth RM600,000. You owe RM250,000 on your current mortgage. At 90% LTV, you can borrow up to RM540,000. After settling your existing RM250,000 loan, you receive RM290,000 in cash.
Cash Out Refinance Calculator
Cash Out Calculator
Estimate your available cash-out amount
Enter your property value and outstanding loan to see your potential cash-out amount
This is an estimate. Actual amount depends on bank valuation, credit assessment, and BNM guidelines.
How Much Cash Can You Get?
The amount of cash you can access depends on your property's Loan-to-Value (LTV) ratio and your existing loan balance. Here's how banks calculate your cash-out amount:
LTV Limits in Malaysia:
| Property | Max LTV | Notes |
|---|---|---|
| 1st Property | 90% | Best rates available |
| 2nd Property | 90% | Subject to credit assessment |
| 3rd+ Property | 70% | BNM policy restriction |
Example: High Equity Property
- Property Value: RM800,000
- Outstanding Loan: RM200,000
- Max Loan (90%): RM720,000
- Cash Out Available: RM520,000
Example: Lower Equity Property
- Property Value: RM500,000
- Outstanding Loan: RM350,000
- Max Loan (90%): RM450,000
- Cash Out Available: RM100,000
BNM 10-Year Rule for Cash Out Refinance Explained
Important Policy Update for 2026
Bank Negara Malaysia (BNM) has guidelines affecting cash-out refinance tenure. Understanding this rule is crucial for planning your cash-out strategy.
What is the 10-Year Rule?
BNM guidelines suggest that the cash-out portion of your refinance should ideally be repaid within 10 years. This doesn't mean your entire loan is limited to 10 years – only the cash-out component may be structured with this shorter tenure in mind.
How Banks Implement This
Different banks handle this differently:
- Some banks split the loan into two portions with different tenures
- Some apply a blended rate approach
- Some have more flexible interpretation based on purpose of funds
Impact on Your Monthly Payment
If the 10-year rule applies to your cash-out portion, your monthly payment may be higher than expected. For example, RM200,000 cash-out at 4% over 10 years = RM2,024/month, versus RM955/month if spread over 25 years.
Pro Tip: Always ask the bank upfront how they structure cash-out loans and get the full amortization schedule before committing. Our advisors can help you find banks with the most favorable terms.
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Cash Out vs Regular Refinance - What's the Difference?
| Feature | Cash Out Refinance | Regular Refinance |
|---|---|---|
| Purpose | Access equity as cash + lower rate | Lower interest rate only |
| New Loan Amount | Larger than existing loan | Same as or less than existing loan |
| Cash Received | Yes - the difference | No |
| Interest Rate | May be slightly higher | Usually lowest available |
| Monthly Payment | Usually increases | Usually decreases |
| Tenure Rules | May have 10-year rule on cash portion | Standard up to 35 years |
| Best For | Accessing funds for specific needs | Reducing monthly payments |
Cash Out Refinance vs Home Equity Loan — What's the Difference?
In Malaysia, "home equity loan" is not common like in the US. Here's how they compare:
| Feature | Cash Out Refinance | Home Equity Loan (US-style) |
|---|---|---|
| Availability in Malaysia | Yes, all major banks | Very limited |
| How it works | Replace existing loan + get cash | Second loan on top of existing |
| Number of loans | 1 (new loan) | 2 (original + equity loan) |
| Interest rate | 3.80% – 4.50% | Usually higher |
| Best option in Malaysia | Recommended | Not common |
Bottom line: In Malaysia, cash out refinance is the standard way to access home equity. True "home equity loans" as separate products are rarely offered by local banks.
Pros & Cons of Cash Out Refinance
Pros
- Access large sums (up to 80-90% of property value)
- Lower interest rate than personal loans (3.80% vs 6-18%)
- Longer tenure = lower monthly payments
- Use funds for any purpose
- May consolidate other debts at a lower rate
Cons
- Your home is collateral (risk of foreclosure)
- Refinancing costs (RM3k-8k in fees)
- Longer to pay off your home
- Takes 6-10 weeks to process
- Must meet DSR requirements
When Does Cash Out Refinance Make Sense?
Cash-out refinance is a powerful financial tool, but it's not right for everyone. Here are the scenarios where it typically makes sense:
Home Renovations
Use equity to upgrade your home, potentially increasing its value. Kitchen and bathroom renovations often return 70-80% of their cost in added property value.
✓ Good use of cash-out funds
Pay off high-interest credit cards (18-24%) or personal loans (6-12%) with your mortgage rate (3.80-4.50%). Can save thousands in interest annually.
✓ Often the best use case
Investment
Invest in assets that can generate returns higher than your mortgage rate. Common uses: property investment, business capital, education.
⚠ Good if returns exceed loan cost
Emergency Fund
Medical emergencies, unexpected expenses, or bridging cash flow gaps. Lower cost than personal loans or credit cards.
⚠ Consider only for genuine emergencies
When NOT to Cash Out:
- • Lifestyle expenses or vacations (you're paying interest for years)
- • Buying depreciating assets like cars
- • Speculative investments you don't fully understand
- • If you can't afford the potentially higher monthly payments
Find Out Your Cash Out Amount
Get a free assessment of how much cash you can access from your property
Which Banks Offer Cash Out Refinance in Malaysia?
Most major Malaysian banks offer cash-out refinancing. Here are the top options with their current rates and features:
| Bank | Rate From | Max LTV | Best For |
|---|---|---|---|
| Bank Islam | 3.80% | 80% | Lowest rate (Islamic) |
| Standard Chartered | 3.90% | 85% | Offset account |
| RHB | 4.10% | 80% | Fast approval |
| Bank Rakyat | 4.20% | 80% | Government servants |
| Public Bank | 4.22% | 80% | Reliable & stable |
| Bank Muamalat | 4.25% | 80% | Islamic financing |
| HSBC | 4.30% | 85% | RM50k costs waived |
| Maybank | 4.35% | 90% | Highest LTV (90%) |
| CIMB | 4.35% | 85% | Self-employed friendly |
| Hong Leong | 4.38% | 85% | High DSR accepted |
| AmBank | 4.40% | 80% | Flexible terms |
| UOB | 4.61% | 85% | Foreigners welcome |
| LPPSA | N/A | N/A | Cannot cash out |
Rates as of 2026. LPPSA does not offer cash-out refinancing.
Cash Out Refinance Eligibility & Documents Required
Eligibility Requirements
- Malaysian citizen or PR
- Age 21-65 years (loan ends by age 70)
- Minimum income: RM3,000/month
- DSR below 70% (including new loan)
- Clean CCRIS/CTOS record
- Sufficient property equity
Documents Required
- IC (MyKad) - front and back
- Salary slips (3 months)
- Bank statements (6 months)
- EA form / Tax returns
- Current loan statement
- Property title / S&P agreement
The Cash Out Refinance Process Step-by-Step
Assess Your Equity
Calculate approximately how much cash you can access. Property value minus outstanding loan, up to 90% LTV.
Compare Banks & Rates
Different banks have different terms for cash-out. We can help compare multiple banks simultaneously.
Submit Application
Apply to your chosen bank(s) with complete documentation. Applying to multiple banks increases approval chances.
Property Valuation
Bank sends a valuer to assess your property's current market value. This determines your maximum cash-out.
Credit Approval
Bank reviews your application, income, and property valuation. They'll confirm your approved cash-out amount.
Accept Loan Offer
Review the Letter of Offer carefully. Confirm the cash-out amount, rate, and monthly payment.
Legal Process
Lawyers prepare loan and security documentation. Sign all required documents.
Disbursement
Bank settles your old loan. Cash-out amount credited to your account. Done!
Risks & Things to Watch Out For
While cash-out refinancing can be beneficial, it's important to understand the risks:
Higher Total Interest Over Time
You're borrowing more money for potentially longer. Even at a lower rate, you may pay more total interest over the life of the loan.
Increased Monthly Payments
Your new loan is larger, so monthly payments typically increase. Ensure you can comfortably afford the new payment.
Reduced Home Equity
You're trading equity for cash. This reduces your ownership stake and could affect your ability to sell if property values drop.
New Lock-in Period
Most cash-out refinances come with a new 3-5 year lock-in period. Early exit means paying penalties.
Costs Add Up
Legal fees, valuation, stamp duty, and other costs can total 2-5% of loan amount. Factor these into your decision.
Our Advice: Cash-out refinancing makes sense when you're using the funds for value-adding purposes (renovations, high-interest debt payoff, or investments with returns above your mortgage rate) and you can comfortably afford the new monthly payment.
Frequently Asked Questions About Cash Out Refinance
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DSR Calculator
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Documents Required
Complete document checklist